The outlook appears mixed for regional countries and their fixed income risk premiums

After two years of continuous negotiations, the P5+1 — the United Nations Security Council’s five permanent members (China, France, Russia, the UK and the US) plus Germany — agreed to a nuclear deal with Iran on July 14. Pending several phases of implementation, the agreement means Iran may no longer be excluded from world financial markets. After analyzing the implications for emerging markets of Iran’s reintegration into the world economy, Invesco’s Emerging Markets Debt team believes the effects will be mixed for regional countries and their fixed income risk premiums.

As investors anticipate rising rates, we examine the historical performance of convertible securities

Over the past few months, several major companies involved in the automotive, telecommunications, energy and other industries have issued convertible securities to help fund their business activities. Some investors may not be familiar with convertibles — but given their historical outperformance during times of rising interest rates, I believe now is the time for investors to peer under the hood and learn how convertibles work.

Investing in infrastructure: Part 1

This two-part series examines the expanding capital requirements for infrastructure globally as developed markets confront ongoing replacement needs, and the urbanization of emerging markets place additional stress on the existing foundation. This first part looks at sources of funding, and the second part will explore what this macro trend may mean for investors.

Infrastructure is the backbone of every economy, providing essential public services such as water supply, energy and mobility. And for investors, infrastructure also has the potential to provide unique benefits.

Current risks highlight the need for professional credit selection

The changing tides of today’s global macro environment remind me of a recent family trip to the Florida coast. As the sun began to fade one late afternoon on our trip, the once-mighty waves died down, and the water’s edge crept further and further away from our beach chairs planted in the sand. Much to my children’s delight, the receding tide exposed numerous live shells on the sandbar, which suddenly became vulnerable in their new environment.

Like those shells, I believe global changes are exposing some vulnerabilities for investors in certain sectors. For example, a decade ago, a weak US dollar and rapidly growing emerging markets acted as a tailwind for investment in basic materials companies. A construction boom in China was driving prices higher for nearly all commodities.

Despite the apparent risks, the US equity market is pricing limited risk from China

The Chinese equity market has declined sharply over the past month, with the Shanghai Composite Index off 34.9% from its June 12 high to a July 9 low.1 This decline is on par with the 1987 US stock market crash, but has yet to reach the depths of the 2007 sell-off in China or the US financial crisis of 2007 and 2008. The steep drop has touched off fears that the Chinese economy will suffer an adverse wealth effect and a material slowdown in growth — and we’re already seeing signs of such a slowdown:

Audi recently indicated it was abandoning its Chinese sales target, noting weaker demand, while Jaguar Land Rover cut prices and its sales target due to slowing demand. 1

Bloomberg ran a story on July 16 highlighting forced real estate sales to meet margin calls. A broker from Centaline Group was quoted as saying the stock market decline had delayed or terminated home purchases.1

Chinese consumers are leveraged to the equity market. Margin debt outstanding is elevated at 918 billion yuan. That is about double last year’s level and is putting pressure on consumer balance sheets.1 How does it get repaid?

Income growth and the Chinese labor market are both softening. Per-capita disposable income expanded 4.75% on a year-over-year basis in the second quarter — well below China’s 10-year average of 11.5% — while the ratio of jobs-to-applicants declined to 1.06 in June, down from a peak of 1.15 in December 2014.1

Choosing the right fund manager is an important decision for investors, and many rely on data screens to help them sift through mountains of performance numbers. But screens alone don’t tell you the whole story — to get a clear view of how a fund might fit into your portfolio, you also need a window into the mind of the manager.

Retirement Focus

Misperceptions abound about collective investment trusts (CITs), also known as collective trust funds. In my last blog, Collective trusts: The truth about regulations, transparency and eligibility, I corrected three common myths about these vehicles. Below, I provide the true story […]

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The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.